Microsoft Reports Record Third-Quarter Revenue

Net Income (loss) – $4,006 [compared to $2,977 for three months ended 03/31/09]

Entertainment and Devices Division

Revenue – $1,665 [compared to $1,629 for three months ended 03/31/09]

Operating Income (loss) – $165 [compared to $(41) for three months ended 03/31/09]

Full press release and links to financial statements after the break.

REDMOND, Wash. — Apr. 22, 2010 — Microsoft Corp. today announced record third-quarter revenue of $14.50 billion for the quarter ended Mar. 31, 2010, a 6% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.17 billion, $4.01 billion and $0.45 per share, which represented increases of 17%, 35% and 36%, respectively, when compared with the prior year period.

The results include the deferral of $305 million of revenue relating to the Microsoft Office 2010 Technology Guarantee program. Adjusting for the revenue deferral, third-quarter revenue totaled $14.81 billion, an increase of 8% over the prior year period.

“Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox LIVE and our emerging cloud services,” said Peter Klein, chief financial officer at Microsoft. “Our record third-quarter revenue along with continued rigor on cost management resulted in exceptional EPS growth.”

Windows revenue was up 28%, compared with the same quarter a year earlier, driven by strong demand for Windows 7. More than 10% of all PCs worldwide are running Windows 7 today, making Windows 7 by far the fastest-selling operating system in history.

“Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong,” said Kevin Turner, chief operating officer. “We are also seeing tremendous interest in our market-leading cloud services for business.”

Business Outlook

Microsoft offers operating expense guidance of $26.1 billion to $26.3 billion for the full year ending June 30, 2010.

Webcast Details

Peter Klein, chief financial officer, Frank Brod, chief accounting officer, and Bill Koefoed, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/msft. The webcast will be available for replay through the close of business on April 22, 2011.

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

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Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

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challenges to Microsoft’s business model;
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intense competition in all of Microsoft’s markets;
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Microsoft’s continued ability to protect its intellectual property rights;
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claims that Microsoft has infringed the intellectual property rights of others;
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the possibility of unauthorized disclosure of significant portions of Microsoft’s source code;
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actual or perceived security vulnerabilities in Microsoft products that could reduce revenue or lead to liability;
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government litigation and regulation affecting how Microsoft designs and markets its products;
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Microsoft’s ability to attract and retain talented employees;
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delays in product development and related product release schedules;
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significant business investments that may not gain customer acceptance and produce offsetting increases in revenue;
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unfavorable changes in general economic conditions, disruption of our partner networks or sales channels, or the availability of credit that affect demand for Microsoft’s products and services or the value of our investment portfolio;
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improper disclosure of personal data could result in liability and harm to Microsoft’s reputation; and
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outages and disruptions of services provided to customers directly or through third parties if Microsoft fails to maintain an adequate operations infrastructure.

For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations Web site at http://www.microsoft.com/msft.

All information in this release is as of Apr. 22, 2010. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.